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mgmt 464 t1 ch2

STUDY
PLAY
The requirements of a board of directors vary significantly by country and by state; however, there is a developing consensus as to what the major responsibilities should be. Which of the following is NOT one of the responsibilities?
becoming directly involved in managerial decisions
Society increasingly expects corporate boards to balance the economical goal of profitability with the social needs of society (T/F)
true
Catalyst-level board of directors typically
take leading roles in establishing and modifying the company missions, objectives and strategy
Agency theory suggests that the majority of a board needs to be from outside the firm (T/F)
true
While 97% of large US corporations now use nominating committees to identify potential directors, this practice is not as common in Europe (T/F)
true
Those directors who fail to act with due care and allow the corporation to be harmed may be held personally liable (T/F)
true
The concept of the lead director originated in
the united kingdom
Which of the following is NOT one of the four major issues researched by the S & P Corporate governance Scoring System?
research and development initiatives
Under what circumstances does an INDIRECT interlocking directorate exist?
when two corporations have directors who serve on the board of a third firm
The New York Stock Exchange (NYSE) requires corporations to have
an audit committee composed entirely of independent, outside members
A highly involved board does all of the following EXCEPT
manage the every day operations of the organization
The average large, publicly held US corporation has around
10 directors
Transformational leaders transform their organizations from market leaders in one industry to market leadership in another (T/F)
false
The U.S. Clayton Act and Banking Act of 1933
prohibit interlocking directorates by U.S. companies competing in the same industry
From the perspective of the public, the primary job of the board of directors is
to closely monitor the actions of management
A direct interlocking directorate occurs when two corporations have directors who also serve on the board of a third firm, such as a bank (T/F)
false
The theory which states that problems arise in corporations because top management no longer is willing to bear the brunt of their decisions unless they own a substantial amount of stock in the corporation is called
agency theory
The average board member of a U.S. Fortune 500 firm serves on ___ boards
3
Hiring and firing the CEO and top management is one of the five responsibilities of the board of directors (T/F)
true
Jeff Bezos, CEO of Amazon.com , uses the S team to engage in continuous strategic planning (T/F)
true
An agency problem can occur when
all of the above
Which of the following is NOT descriptive of interlocking directorates?
interlocking directorates are more common in small, family owned companies
Fewer large corporations may keep the firm's recently retired CEO on the board after retirement since there is a greater likelihood of conflict of interest and less objectivity (T/F)
true
Which of the following is NOT a key characteristic of transformational executive leaders?
the CEO energized the board to formulate strategy
According to the text, most publicly owned large corporations today tend to have boards with what degree of involvement in the strategic management process?
nominal to active
The confidence levels of executive leaders may blind them to information that is contrary to a decided course of action; this may help to understand why overconfident CEO's are more likely to conduct mergers and acquisitions (T/F)
true
The Sarbanes-Oxley Act was designed to protect
shareholders from the excesses and failed oversight of firms
A description of what the company is capable of becoming is referred to as
strategic vision
A benefit of the increased disclosure requirements of the Sarbanes-Oxley Act has been more reliable corporate financial statements (T/F)
true
The top criterion for selecting a good director in U.S. corporations is their willingness to challenge management when necessary (T/F)
true
According to __ theory, ___ directors tend to identify with the corporation
stewardship; inside
All of the following are true of overconfident CEO's EXCEPT
overconfident CEOs were less likely to make an acquisition when they could avoid selling new stock to finance them
The vast majority of inside directors are from all of the following EXCEPT
lower-level operating employee
What percentage of the Fortune 1000 U.S. corporations had boards of directors with at least one woman member in 2006?
85%
Research reveals that the likelihood of a firm engaging in illegal behavior or being sued declines
with the addition of outsiders on the board
More than ___ of outside directors surveyed that they had been names as part of a lawsuit against the corporation
50%
When a board of directors is involved to a limited degree in the performance or review of selected key decisions, indicators, or programs of management, there is a ___ degree of involvement
nominal participation
The function of a nominating committee is to
find outside board members for electing by the stockholder
Generally, the smaller the corporation, the less active is its board of directors
true
The ___ boards typically never initiate or determine strategy unless a crisis occurs
rubber stamp
Executive leadership is the directing of activities toward the accomplishment of corporate objectives (T/F)
true
The SEC requires the nominating and compensation committees are staffed entirely by outside directors (T/F)
true
Which of the following statements is true regarding the board of directors?
all of the above
The vast majority of inside directors are from all the following EXCEPT
lower-level operating employee
In implementing the Sarbanes-Oxley Act, the SEC required in 2004 that a company disclose
if it has adopted a code of ethics that applied to the CEO and the CFO
The percentage of large U.S. corporations using nominating committees to identify potential new directors is approximately
97%
Codetermination has been used in Germany since the 1950s, but has not been used in the US (T/F)
false
The board of directors has an obligation to approve all decisions that might affect the long-run of the corporation (T/F)
true
The role of the board of directors in the strategic management of the corporation is likely to
be more active in the future
Board members who are not employed by the corporation, but handle the legal or insurance needs of the firm and are thus not a true "outsider" are what kind of directors?
affiliated directors
One study conducted by Korn/Ferry International of directors of large US corporations found that more than ___ of directors indicated that their CEOs were not utilizing them to their full potential in strategy setting process
30%
According to a survey of 156 large corporations in what percentage of the firms were strategies first proposed in business units and then sent to headquarters for approval?
65%
A survey of U.S. corporations found that ____ of boards of directors had at least one African American member in 2006
46%
Surveys of large U.S. and Canadian corporations found outsiders make up what percentage of total board members?
80%
Which of the following is NOT a trend in corporate governance expected to continue
boards are getting larger
A careless director or directors can be held personably liable for harm done to the corporation if they failed to act with
due care
____ theory argues that senior executive over time tend to view the corporation as an extension of themselves
stewardship
The percentage of CEOs of British corporations who also serve as chairman of the board is
5%
Usually, the strategic planning staff is charged with supporting only top management in the strategic planning process (T/F)
false
Interlocking directorates are a useful method of gaining both inside information about an uncertain environment and objective expertise about potential strategies and tactics. They are however increasingly frowned upon because of the possibility of collusion (T/F)
true
Which of the following is NOT a task of the board of directors in strategic management?
to implement
Board members who are most likely to face conflict of interest are known as
affiliated directors
Which country pioneered the use of worker participation on corporate boards?
germany
Approximately 70% of the top executives of the US publicly held corporations hold the dual designation of chairman and CEO (T/F)
true
A staggered board
has only one portion of the board stand for election each year
Stewardship theory proposes insiders tend to identify with the corporation and is success (T/F)
true
Under what circumstances does a DIRECT interlocking directorate exist?
occurs when one or more individuals on one board also serve on a board of a second firm
According to the text, which of the following is NOT a typical standing committee of boards of directors?
public relations committee
The term corporate governance refers to the relationship among the board of directors, top management, and the shareholders in determining the direction and performance of the corporation (T/F)
true
A 2008 McKinsey and Company survey found that less than 10 percent of a board's time is spent on strategy (T/F)
false
The role of the board of directors in the strategic management of the corporation is likely to be less active in the future (T/F)
false
Corporation is
a mechanism established to allow different parties to contribute capital, expertise and labor for their mutual benefit
Corporation is governed by
the board of directors that oversees top management with the concurrence of the shareholders
Corporate Governance
the relationship among the board of directors, top management and shareholders in determining the direction and performance of the corporation
Responsibilities of the Board of Directors
sets corporate strategy, overall direction, mission or vision, hires and fires the CEO and top management, controls, monitors, or supervises top management, reviews and approves the use of resources, cares for shareholder's interests, and assures that the corporation is managed in accordance with state laws, security regulations and conflict of interest situations
Monitor
developments inside and outside the corporation
Evaluate and Influence
management proposals, decisions, and actions
Initiate and Determine
the corporations mission and strategies
Inside Directors
are officers or executives employed by the boards corporation
Outside directors
are executives of other firms by are not employees of the boards corporation
Phantom (LOW)
never knows what to do, if anything; no degree of involvement
Minimal Review (Medium)
formally reviews selected issues that officers bring to its attention
Catalyst (High)
takes the leading role in establishing and modifying the mission, objectives, strategies, and policies. it has a very active strategy committee
Retired Executive Directors
used to work for the corporation, partly responsible for past decisions affecting current strategy
Family Directors
decedents of the found and own significant black of stock
Avoiding Governance Improvements
multiple classes of stock, public to private ownership, and controlled companies
Strategic Vision
description of what the company is capable of becoming
According to an international selection of board of directors, which of the following tasks is the board of directors primary responsibility?
setting corporate strategy, overall direction, mission, or vision
The inclusion of a corporation's workers on its board is called
codetermination
According to the Sarbanes-Oxley Act, what must be true of directors serving on an audit committee?
they must all be independent of the firm and receive no fees other than for services of the director
The Standards & Poor Corporate Governance Scoring system researches all of the following major issues EXCEPT
financial transparency and information disclosure
Which of the following is an accurate statement concerning trends in the power structure of boards?
outside directors are increasing their power in publicly held corporations and CEOs are loosening their grip on boards
If a top management team has a diversity of functional backgrounds, experiences, and length of time with the company, what impact does this tend to have on corporate market share and profitability?
diversity in top management tends to be significantly related to improvements in corporate market share and profitability
What is the most effective strategy for a CEO to take regarding performance standards if she wants to command respect and influences strategy formulation and implementation?
she will communicate challenging performance standards but will also show confidence in her follower's ability to meet these standards
The percentage of directors of small, publicly held corporations which are outsiders is approximately
20%
Codetermination
is the inclusions of a corporations employees on its board
The majority of outside directors are active or retired CEOs and COOs of other corporations (T/F)
true
The percentage of CEOs of U.S. fortune 500 corporations to also serve as chairman of the board is
70%